The effect of the coronavirus pandemic on residential property transactions.
Government guidance in relation to residential property transactions is changing daily but the Government’s advice published on 26 March 2020 https://www.gov.uk/guidance/government-advice-on-home-moving-during-the-coronavirus-covid-19-outbreak advises that: –
“There is no need to pull out of transactions, but we all need to ensure we are following guidance to stay at home and away from others at all times, including the specific measures for those who are presenting symptoms, self-isolating or shielding. Prioritising the health of individuals and the public must be the priority”.
The Government also advises that:
- Home buyers and renters should, where possible, delay moving to a new house while measures are in place to fight coronavirus (COVID-19).
- That if you have already exchanged contracts and the property is currently occupied then all parties should work together to agree a delay or another way to resolve this matter.
- If moving is unavoidable for contractual reasons and the parties are unable to reach an agreement to delay, people must follow advice on staying away from others to minimise the spread of the virus.
- In line with Government’s advice, anyone with symptoms, self-isolating or shielding from the virus, should follow medical advice which will mean not moving house for the time being, if at all possible. All parties should prioritise agreeing amicable arrangements to change move dates for individuals in this group, or where someone in a chain is in this group.
All that being said, is it practical to try to move house at this time? Our head of Residential Property Lynsey Stuchfield provides the answers to questions our property team are frequently being asked.
1. Are residential property transactions being affected by the coronavirus pandemic?
We and our clients, are experiencing the following practical difficulties as a result of the current situation:
- Surveyors being unable to carry our surveys or valuations
- Mortgage offers being delayed/withdrawn
- Search results being delayed
- Delays in the release of mortgage funds
- Delays in the receipt of redemption statements
- Buyer and / or sellers losing their jobs and withdrawing from the transaction
- A party in the chain falling ill and needing to self isolate thus either delaying the exchange or a failure to complete on the contracted data
- Some law firms not being operational/having a policy not to exchange and complete property matters at the present time
- Parties being unable to sign documentation where a witness is required
- Difficulties in some estate agents being able to facilitate key collections on completion
- Removal companies having to cancel planned moves or closing
These difficulties are preventing transactions progressing, causing transactions to fall through or be placed on hold prior to exchange and causing issues with the completion of transactions which have already exchanged.
2. I have exchanged contracts, do I still have to complete on the agreed completion date if I have, for example, lost my job or fallen ill, or the person in the property I am moving to is ill?
Failure to complete for any reason, including being ill with coronavirus, will put you in breach of contract and please see point 3 below regarding the consequences of this. The contract provisions relating to default will usually apply unless the non-defaulting party takes a ‘good faith’ view.
However, the physical move can only take place subject to the Government’s guidelines above but such guidelines will not prevent a party from being in breach of contract should they fail to complete on the contractual completion date.
3. What are the implications of being in breach of contract?
This can be costly beginning with payment of interest under the contract for late completion to a notice to complete being served and the innocent party ultimately taking the 10% deposit and walking away from the transaction. Importantly other reasonable costs that have been incurred by the innocent party as a result of the breach of the defaulting party can also be claimed. Examples here can include mortgage interest, wasted removal costs and even temporary accommodation costs (such as where a party cannot complete on their purchase due to the default of their seller but breaks the chain so as to complete with their buyer to avoid being in breach of contract to their buyer). In a long chain this could include significant costs being passed on to the defaulting party.
4. How can we continue with the transaction but protect ourselves from the risk of having to breach the contract?
Whilst some firms are looking to add extra clauses into their contracts to cover failure to complete due to illness or self-isolation caused by coronavirus, such clauses can often create greater difficulties than they seek to solve. Each transaction needs considering on its own merits and therefore universal drafting of additional clauses to cover the current situation is not recommended. Careful drafting is needed on a case by case basis where additional clauses are needed. The standard conditions of sale as they already are provide for the remedies available to an innocent party should a contract default take place.
As with many other law firms, we will only operate conveyancing matters at the current time on the basis that a sale and/or purchase exchanges contracts and completes on the same day and if the house move is critical as another date cannot be agreed. Whilst this is not ideal in the case of a chain (as there would be no guarantee that the transaction would go ahead until the actual day) in view of the current climate and the risks involved to you as a buyer/seller we will only be able to proceed to make your sale and/or purchase legally binding at the current time if completion takes place on the same day that your matter is made legally binding.
The Law Society continues to issue guidance to law firms and they state that ‘Using pragmatism and common sense, it’s hoped that transactions can continue to take place without too much disruption…’ The Residential Property Team at Butcher & Barlow are continually reviewing the updated guidance and will be advising clients with this in mind.
This advice is correct as at 1.15 pm on 27th March 2020
Although is accordance with Government guidelines, our offices remain closed, the Residential Property team remain available for advice and guidance on any existing or new matter and please do not hesitate to get in touch via email@example.com or email your legal adviser directly.
To view Butcher & Barlow’s own working practices, please visit www.butcher-barlow.co.uk/news.